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A Sustainable and Affordable Way Out of the Housing Crisis
In the last two decades we’ve seen an increase in home prices and rents and a decrease in the number of homes that are available and affordable. Therefore, affordable housing has emerged as a movement to address this housing crisis. The emergence of affordable housing led many to think about its (lack of) eco-friendly standards. This sector has been left behind on sustainable practices, mainly because green building is seen as costly and thus not suitable for affordable housing. However, there are long term benefits and cost savings from green affordable housing for residents and developers as well.
THE HOUSING CRISIS
Scarce and expensive housing has become the norm all over the U.S., now including not only the big coastal cities like New York and San Francisco, but also smaller regional ones like Nashville, Austin and Texas. According to ATTOM Data Solutions - a property-data firm - in 79% of America, in 2022 the average family can't afford to buy the median-priced single-family home. Median single-family home prices in the first quarter of 2022 were up by at least 10% over the first quarter of 2021 in 371 of the 586 counties included in the report. This increase in prices is accompanied by not only a very small increase in average wages, but also a shortage of available, affordable housing.
DEFINING AFFORDABLE HOUSING
What is considered as an affordable house varies based on the country, area income, and family’s income and size.
A common definition for affordable housing, taken from the United States Department of Housing and Urban Development, refers to housing whose cost (in rent or mortgage payments) does not exceed 30% of the gross monthly income of the occupant.
In recent years, there’s been a systematic shortage of affordable housing; no state has an adequate supply of affordable and available homes for extremely low-income renters. Nationwide, in 2021 there were only about 165,300 homes for sale that were considered affordable for households with between $50,000 and $75,000 in annual income, an analysis by the National Association of Realtors (NAR) found. It is estimated that the U.S. needs 6.8 million units to meet demand.
GREEN AFFORDABLE HOUSINGThe housing crisis led many to think about how to solve this issue while simultaneously addressing the environmental problem. While the progress of sustainability practices is impressive, it has not included the affordable housing sector, mainly because green building is seen as costly. Affordable housing is mostly focused on ‘first costs’, it has a regulatory rigidity that limits green innovations and a finance system which fails to recognize the long term value of green investments. However, long term benefits and cost savings of green affordable building are real and substantial.
BENEFITS OF GREEN AFFORDABLE HOUSING FOR RESIDENTS AND DEVELOPERS
Cost-effective - Residents are the ones who benefit the most from green building features. For residents of affordable housing units, the life-cycle financial outcome is almost always positive, with a mean net present value (NPV) of over $12,000, New Ecology Inc. reports. This is the case largely because residents are not responsible for the incremental capital costs of greening. Additionally, they receive the benefits of lower utility costs.
Lower utility bills - Residents receive lower utility bills due to reduced energy and water use. There’s a general consensus between developers, property managers and Housing Finance Agencies that green developments are more energy efficient. According to a report by Southface and the Virginia Center for Housing Research residents of green developments use 14% less energy per square foot. Residents of green affordable units also report savings on water bills, ranging from 35% to 40% less on average than at comparable properties.
Health benefits - Improved health and life quality are substantial benefits of green affordable housing. Building practices that reduce impacts on human health and the environment include the use of less toxic materials, better heating and cooling and ventilation design to improve indoor air quality. The superior air-quality causes significant improvements in overall health, asthma and non-asthma respiratory problems. Research has found that children with asthma had fewer symptoms, health-related school absences, and hospitalizations when they lived in public housing that incorporated green design elements.
How to make your home green: But residents don’t always have to rely on developers for a green affordable home. There are ways to improve a home’s efficiency, whether you rent or own it. Also don’t forget that adding renewable energy to a home can lower the long-term utility costs, especially as utility costs are on the rise. You can check out Realty Sage’s affiliate partner Energy Sage to compare solar system types and costs for your home.
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Cost-effective - While it is true that most of the first-cost burden falls to developers, greening a complex can still be profitable even for them. Often the up-front costs of greening are reduced through grants and rebates. Additionally, the use of more durable materials and equipment result in reduced replacement costs and provide additional life-cycle financial benefits. In the end, about half of the developers in the 16 cases of New Ecology Inc’s report, receive benefits from greening that exceed their costs. Generally, the earlier green building features are incorporated into the design process, the lower the cost.
Earn green certificates - Implementing green building practices makes the property eligible to get a variety of green certificates. This is a great achievement on its own, but it also opens the door to grants, investments, and technical assistance to further improve the property’s quality.
HOW DEVELOPERS CAN INTEGRATE GREEN
The same report from New Ecology Inc. provides some suggestions on how developers can adjust their practice to more effectively facilitate green affordable housing development:
Conduct life-cycle cost analysis - The current system places too much weight on initial capital costs only. Life-cycle costing is needed to adequately assess the true value of the investment. Life-cycle costing takes into account both capital and operating costs. This way developers can better understand the economic benefits and savings of an affordable green-built home.
Assemble an effective team - Select a team to properly determine whether the project is cost-effectively greened. Members should assess the green specifications and oversight contractors who may be unfamiliar with eco-building techniques. Additionally, the team should apply an integrated design approach, meaning the various components and systems of the building should all be incorporated in the project simultaneously.
Search for rebates or subsidies - A project developed as described above has great chances to benefit from financial incentive programs for green building. There are a lot of rebates and subsidies available for green projects from utilities, Energy Star, low-income energy assistance, renewable energy, and other programs.
TURNING CRISIS INTO CREATION WITH GREEN AFFORDABLE HOUSING
The green affordable housing movement emerged from a desire to simultaneously address the housing crisis, environmental sustainability, and human health. Even though green features are sometimes still considered as luxury products with a high premium, we can see that they actually are very cost-effective, both for residents and developers. For low-income residents, the potential of reduced utility costs and improved air quality can go a long way. While for developers, there is a very small premium which in most cases will result in a positive life-cycle due to the operating savings of an affordable green-built home far exceeding the incremental capital costs. Affordable housing developers can incorporate green features in ways that value and support residents and the environment, while generating economic benefits for both the property and its residents.
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